Marketers adapt to leaner budgets

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ADC Telecommunications Inc. executives haven’t purchased any new customer relationship management software since the millennium began. Still, the company says CRM is a priority, and its IT staff is constantly designing and implementing add-ons for the Kana CRM suite it purchased back in 2000.

ADC’s do-it-yourself approach is symptomatic of what other corporations around the world are doing, as organizations look for places to save money and decide that CRM applications are a perfect target.

"We’re in a holding pattern right now, but we’re continuing to do upgrades and enhancements, because we can do them in house," said Candyce Anderson, business analyst for ADC, an Eden Prairie, Minn.-based provider of network equipment, software solutions, and integration services for broadband and multiservice networks.

According to research firm Gartner Group Inc., sales for the entire CRM market dropped from $3.7 billion in 2001 to $3 billion last year. Some segments suffered more than others. Revenues from sales force CRM software dropped from $947 million to $678 million, while call center CRM software sales dropped from $591 million to $484 million.

CRM priorities change

Attitudes have changed, too, according to Meta Group surveys. In 2001, business customers said CRM was their No. 15 spending priority. The following year, respondents rated CRM No. 2 on their lists. This year, however, CRM’s importance dropped significantly, slipping to the No. 9 position. Servers now hold the No. 1 spot, followed by storage systems.

But companies still need and want CRM solutions, said Kevin Scott, senior analyst with AMR Research. They’re just doing things a little differently these days.

"People are going piecemeal," Scott said. "Now they have a larger vision, and they know where they want to go, but no one is buying large suites anymore."

A recent Gartner survey supported Scott’s analysis. More than 63% of recent CRM deployments have been specific applications that handle specific needs, according to Rob Disisto, VP of Gartner’s CRM research division.

For example, companies have purchased customer service applications that enable them to send alerts and e-mails automatically, as well as lead optimization software that integrates with call centers and analytics that handle customer segment predictive modeling.

"People are being more cautious," Disisto said. "They are going to force the large vendors to provide a more compartmentalized view of their software."

Some CRM applications are doing better than others. Marketing applications such as campaign management and analytics saw an uptick in sales last year as compared with 2001, according to Gartner’s research. Sales of the segment jumped to $610 million from $579 million year-over-year.

Campaign planning software and campaign analysis tools are in demand, as is high-level data mining. "People are looking at the ways they can get the most out of what they’ve already invested," said AMR Research’s Scott. "We’re getting a lot of questions about how clients can measure success, and analytics is the answer."

Hosted applications

There are some companies that are embracing the ASP model. The typical ASP customer is a company that still has a marketing and sales budget but lacks a capital expenditure budget, says Liz Roche, VP-enterprise application strategies, CRM with the Meta Group.

"Several of the clients I have spoken to lately are asking how they can get started in a hosted environment," Roche said. "They ask, ‘How can I pay rent versus making a capital investment?’ The plan is always to eventually bring it all back in house once money frees up."

ADC Telecommunications’ Anderson said she is looking forward to the day when she can spend more freely on CRM solutions.

"Right now, it’s all about cost cutting across the board," she said. "We’re looking at enhancing the tools we have. Someday, that will change."

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